Beginning Jan. 1, 2015, PPACA’s employer mandate generally requires applicable large employers to offer coverage to all full-time employees (FTEs) and their dependents or risk paying a penalty. FTEs include those employees working at least 30 hours weekly or 130 monthly hours.
Some employers face special challenges in identifying which of their employees are FTEs, particularly those with irregular or seasonal work schedules, such as landscaping and construction companies, hotels, restaurants, retail and similar businesses. These employees may be considered “variable hour” and “seasonal” employees, which allows special treatment in determining FTE status.
Specifically, employers with these types of employees may choose to implement measurement periods (sometimes also called “look-back periods”) to determine whether such employees work enough hours to be considered FTEs and offered coverage. A look-back measurement period determines eligibility for a subsequent coverage period, sometimes called a “stability period.” To illustrate, if an employee averages 30 hours or more per week during the measurement period, that employee is treated as an FTE (and must be offered coverage) for the entire subsequent stability period. The simplest example is this: A 12-month measurement period of 2015 that determines eligibility for a 12-month stability period of 2016: If an employee averages 30 hours per week during 2015, that employee is treated as an FTE for 2016—their status is locked in for 2016 regardless of their hours actually worked in 2016. Importantly, look-back measurement periods may only be used for variable hour and seasonal employees, as defined below.
DETERMINING WHICH EMPLOYEES ARE “VARIABLE HOUR’ AND “SEASONAL”
Before discussing the details relating to measurement periods, it’s important to understand the definition of “variable hour” and “seasonal” employees.
A variable hour employee is one whose schedule cannot be definitively known in advance. In other words, the employee’s hours vary such that it is not possible to determine as of the date of hire whether the employee will work 30 weekly (or 130 monthly) hours or more during their period of employment.
A “seasonal” employee is one whose customary annual employment does not exceed six months and whose work begins at approximately the same time each year. Examples of a seasonal employee may include a holiday seasonal retail store employee, a ski instructor or a golf course maintenance worker. In special circumstances, an employee may still be considered seasonal where the season extends beyond six months, such as when a ski instructor works seven or eight months due to an unusually long winter.
Variable hour or seasonal employees do not necessarily include:
- Non-seasonal, short-term full-time employees
- Part-time employees
- Per diem employees working full-time hours
- Commission-based employees
- Employees hired into high-turnover positions that are working full-time hours
- Staffing and leased employees
- Teachers and adjunct faculty
If the expected hours for the employees are known, they are most likely not variable hour employees.